Do I Need A Deposit To Buy A Home?
You may have seen one of the many companies out there promoting ‘no deposit home loans’. When you look further into this, often you find out that they are only ‘deposit free’ if you have a guarantor (read what a guarantor is here). For most people, this isn’t an option.
So while technically it is possible to buy a home without a deposit, it’s not the norm and it’s not reasonable to expect. A more reasonable expectation is a ‘low deposit’ home loan. This is where you can buy or build a home with a small amount of money saved, and it’s something that we offer here at First Home Hero.
How does a low deposit home loan work?
There is a common misconception that to buy a home, you must save at least 20% of the purchase price. When we are talking about a property of just $450,000, that would mean needing to save $90,000. That’s a lot of moolah! And as you are probably aware, could take years to save. While having that amount of savings will often get you the best deal, there are lenders that will accept 10% and even 5% of the purchase price as a deposit. These loans do often come with some fees, and possibly a slightly higher interest rate, but it’s a great way to get into the market quite quickly.
So how much should I have saved?
This really depends on the cost of the house you want to buy or build. If we go back to the $450,000 example, a 5% deposit would be $22,500. You then also need to factor in any other costs involved on top of the deposit, like we talk about in this article here. Luckily with First Home Hero our $15,000 contribution in conjunction with the QLD Government First Home Owners Grant means that you could have $30,000 to use towards a deposit. That being said, you should try to have at least $5,000 saved for us to really help you build your first home.
Having $5,000 saved would maximise your First Home Hero experience, and take a lot of the pressure off. This might seem like a faraway goal if you have no savings, but it’s really not too bad. When you break it down, it’s just $100 a week, for a year. Or $200 a week for 6 months! Can you afford to save $100 or more a week?
If you have $5,000 saved and want to build you first home in Queensland, get in contact with us today to get started.